The high returns that have come to characterise UK commercial property investment will continue into 2005, according to Credit Suisse Asset Management.
Credit Suisse, annual return figures for 2004 will be about 17%, making commercial property the top performing asset class over the past 10 years. In 2005, the company is forecasting returns of between 8% and 9%.
Head of property Glenn Newson said: “The increase in returns has been driven by the sheer weight of money looking to invest in the asset class.
“This increase in the level of competition for assets has pushed property yields down, with round 6-7% of a total return of 17% coming from income return, whilst the remaining 10% plus will be from capital growth.”
He added: “For 2005 generally, we would forecast total return for the asset class to be around 8-9%, with approximately 6% coming from the income component and the remainder coming from capital growth.
“Consensus holds that we are unlikely to see any significant movements in either direction with interest rates, and the weight of the total return attributable to the income component should protect against any inflationary pressures. Therefore, from 2005-2008, we would expect average returns of 9%.”
References: EGi News 09/12/04
